Gold Price Rally Stalls Ahead of US NFP Report

Gold Price Outlook: XAU/USD

The recent rally in the price of gold seems to have stalled as it fails to extend the series of higher highs and lows from earlier this week, but bullion may attempt to retrace the decline from the monthly high ($1966) as it trades back above the 50-Day SMA ($1931).

Gold Price Rally Stalls Ahead of US NFP Report

The price of gold struggles to hold its ground as the US Personal Consumption Expenditure (PCE) Price Index points to persistent inflation, with the headline reading climbing to 3.3% in July from 3.0% per annum the month prior.

At the same time, the core PCE, the Federal Reserve’s preferred gauge for inflation, increased to 4.2% from 4.1% during the same period, and data prints coming out of the US may continue to drag on the price of gold as the Non-Farm Payrolls (NFP) report is anticipated to show another rise in employment.

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US Economic Calendar

FOREX.com Economic Calendar

The US is projected to add 170K jobs in August while Average Hourly Earnings are expected to hold steady at 4.4% during the same period, and ongoing signs of a tight labor market may produce headwinds for bullion as it raises the Federal Reserve’s scope to implement higher interests.

However, a weaker-than-expected NFP report may heighten the appeal of gold as it puts pressure on the Federal Open Market Committee (FOMC) to conclude its hiking-cycle, and it remains to be seen if the central bank will adjust the forward guidance at the September meeting as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).

CME FedWatch Tool

Source: CME

Until then, speculation surrounding US monetary policy may sway bullion as the CME FedWatch Tool reflects a greater than 50% probability of seeing US interest rates unchanged over the remainder of the year, with the opening range for September in focus as the price of gold struggles to extend the series of higher highs and lows from earlier this week.

With that said, the US NFP report may sway bullion as the Fed keeps the door open to pursue a more restrictive policy, but the price of gold may attempt to retrace the decline from the monthly high ($1966) as it trades back above the 50-Day SMA ($1931).

Gold Price Chart – XAU/USD Daily

Chart Prepared by David Song, Strategist; Gold Price on TradingView

• The recent rally in gold appears to be stalling as it fails to extend the bullish price series from earlier this week, with a move below the $1928 (23.6% Fibonacci retracement) to $1937 (38.2% Fibonacci extension) area raising the scope for a move towards the $1886 (23.6% Fibonacci extension) to $1897 (61.8% Fibonacci retracement) region.
• Failure to defend the August low ($1885) may push the price of gold towards $1860 (23.6% Fibonacci retracement), but bullion may attempt to retrace the decline from the monthly high ($1966) if it continues to hold above the 50-Day SMA ($1931).
• A break/close above the $1973 (78.6% Fibonacci retracement) to $1977 (50% Fibonacci extension) region brings the July high ($1988) on the radar, with the next area of interest coming in around $2018 (61.8% Fibonacci extension) to $2020 (78.6% Fibonacci extension).

Additional Resources:

USD/JPY Outlook Mired by Failure to Test November 2022 High

GBP/USD Vulnerable to Head-and-Shoulders Pattern

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong